Energy Market Watch: Coal-in-Your-Stocking Edition

There are only a few weeks remaining in 2017, which means it’s the giving time of year. So our gift to you is this month’s Energy Market Watch. (We’d put some wrapping paper and bow on it, but the web design elves are busy. Or so they tell us.) It’s your year-end stocking full of news and notes — and maybe some coal — on events that are sure to affect energy markets in December.

The most important date on December’s energy calendar may be its first as the Federal Energy Regulatory Commission (FERC) eyes a Dec. 11 deadline to respond to a notice of proposed rulemaking (NOPR) request by the Department of Energy (DOE). To recap, that’s FERC, NOPR, DOE. Beyond acronyms and initialisms, the deadline is notable for the degree of uncertainty and potential market impact that may come from FERC’s eventual ruling.

Essentially, the DOE has asked FERC to weigh in on subsidies for coal and nuclear plants that could keep those facilities open in the face of increased competition from natural gas and renewables. The argument in favor: these plants are critical to grid reliability. Those opposed say this is merely an effort by the Trump administration to unfairly prop up the U.S. coal industry. Either way, the end result could have major implications for deregulated power markets and is already bringing a traditionally non-partisan FERC into the political spotlight.

Dec. 12-13: Federal Reserve Meeting

The Fed appears to have saved its best for last. The central bank’s final meeting of 2017 marks one of the most important gatherings in recent years; that’s because December’s conclave is expected to produce tangible results in the form of an interest rate hike. The move comes as the Fed wrestles with competing factors: economic growth suggests further hikes while lackluster inflation urges caution. It’s a complicated question that outgoing chair Janet Yellen may be glad she won’t have to answer. Expect this month’s meeting to offer further clarity on a path forward as the pace of future hikes directly impacts many parts of the global economy, particularly energy.

Dec. 7, 14, 21, 28: US Natural Gas Storage Report

Retail isn’t the only sector with extra holiday hours this month. For natural gas traders, December is often a pivotal month. It’s when the market attempts to gauge early indicators of winter weather, forecasting season heating demand and the major price swings that may result.

In the current state of the natural gas market, one number reigns supreme: the Energy Information Administration’s (EIA) natural gas storage figure. The weekly report is a comprehensive snapshot of the relationship between supply and demand. It lets everyone know just how much gas is available in case another polar vortex decides to rock the market. For that reason, the report can influence natural gas (and often electric power) prices on any given Thursday, but December’s storage numbers get a bit more scrutiny — a bit of an understatment — as the extent of winter risk starts to come into focus.

Dec. 18: EIA Drilling Productivity Report

Earlier this year, OPEC and oil bulls cried foul at the EIA’s expectations for U.S. crude production. They argued the aggressive forecast for U.S. shale growth was unrealistic. Fast-forward to present day and EIA has been vindicated as oil production is at multi-decade highs. More importantly, the U.S. oil industry has shown more signs of accelerating in recent weeks rather than slowing down, which could have major implications for oil and energy prices in 2018.

In terms of shaping those expectations, the EIA’s Drilling Productivity Report is a valuable monthly resource and potential market mover. This report includes the latest figures for well efficiency, drilling activity and near-term production expectations. If anyone ignored the EIA’s figures at the start of the year, they’re surely paying attention now.

The Energy Market Watch is a gift that keeps on giving; more to come in 2018. In the meantime, connect with our team of analysts if understanding and navigating the energy market leaves you less than jolly. Happy holidays and New Year!